Boston Executive, Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: (refer the attached image) The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per unit and supply 1,000 mini-bars for the coming year’s estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the company’s total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini-bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
Boston Executive, Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: (refer the attached image) The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per unit and supply 1,000 mini-bars for the coming year’s estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the company’s total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini-bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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- Boston Executive, Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: (refer the attached image)
The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per unit and supply 1,000 mini-bars for the coming year’s estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the company’s total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased.
The specialized equipment cannot be used and has no market value. However, the space occupied by the mini-bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
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